E-tailers See Some Light

By eweek  |  Posted 2001-04-23

Some e-tailers are bucking the trend of declining revenue in these difficult times by combining physical stores or other retail channels with an online presence and using marketing expertise to boost sales.

1-800 Contacts, Barnesandnoble.com, eBay and FTD.com all reported healthier first-quarter revenue and higher Internet sales last week. And Expedia and Travelocity.com also reached profitability earlier than expected.

"Today, all online retailers are focusing on the bottom line," said Elaine Rubin, chairman of Shop.org, a trade organization for online merchants.

None more so than eBay. The Internet auction site reported huge first-quarter gains in profit and revenue. For the three-month period, the company made $21.1 million on revenue of $154.1 million.

In years past, a lot of flimsy business models encouraged online retailers to experiment with all kinds of marketing efforts that did not contribute to profitability, Rubin said. Thats no longer the case.

For the third quarter in a row, FTD.com reported a net profit and is on track for a profitable year. For the period ended March 31, FTD.com earned $2.4 million, or 5 cents per diluted share, compared with a year-earlier loss of $8.5 million, or 18 cents per diluted share.

The increase in profit stems from FTD.coms revenue growth of 36 percent and an increase in its theme gift-basket sales.

"You need brand and you need distribution," said Michael Soenen, FTD.coms president and CEO, noting the company has a distribution system that relies on local FTD florists to help keep costs low.

Like FTD.com, companies that have been in the direct-mail or phone order business before venturing onto the Internet — such as J.Crew, L.L. Bean and Lands End, — are doing well, said Andrew Bartels, vice president of the e-commerce practice at Giga Information Group.

1-800 Contacts, which sells contact lenses by phone and on the Internet, saw its Internet sales grow to $16.3 million, or 38 percent of net sales, in the latest quarter, up from $9.2 million, or 29 percent of net sales, a year earlier.

Multichannel models, like Bn.com, that allow consumers to shop online as well as walk into physical stores are also doing well, said Robert Labatt, research director at Gartner Group.

"For pure plays to stay the way they are today is an invitation to disaster," Labatt said.

Bn.com is a great example of a traditional business that merged with an online one. The company said first-quarter revenue is expected to grow 23 percent, to about $109 million.

Some pure plays are surviving well, however.

Online travel seller Expedia expects its earnings before noncash items to be roughly $4 million, or 9 cents per share, for its fiscal third quarter ended March 31. This reverses the previous years loss, before noncash items, of $21.4 million, or 50 cents per share.

Travelocitys revenue topped $72.9 million, up 104 percent from the same quarter a year ago. The companys gross travel bookings grew 65 percent over the first quarter of last year, to $833.6 million.

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